Competitive Advantage Erosion

EXECUTIVE SUMMARY

The purpose of this paper is to analyze the growing disparity of science and engineering education between the United States and China.

This disparity which is causing businesses to shift their operations to access highly educated talent pools in Asia are a result of 3 key factors.

1. China, understanding the importance of improving science and engineering education aims to leverage its highly skilled population to boost its competitive advantage in the global market.

2. The United States continues to have its competitive advantage eroded away as fewer and fewer college graduates leave higher education with an advanced degree in science or engineering.

INTRODUCTION

On October 4, 1957, the former Soviet Union launched Sputnik I, the first man-made satellite, into outer space. Sputnik I was a tiny object, only about the size of a basketball, but despite its size, the impact of this event changed the world with respect to politics, military, technology, and especially scientific development. While the launch of a basketball sized object into outers space might seem like a single but important event, it marked the start of the space age and the U.S.-U.S.S.R space race1. Fears of a “missile gap” and being overtaken technologically, drove the United States to increase funding for science and technology research. This push for technological superiority led to the United States’ competitive advantage in information technology that lasted for almost 30 years.

50 years after the launch of Sputnik I, the United States and other economically mature nations are facing a new technology gap. The sharp increase in foreign direct investment being used to build up advanced science and engineering research in Asia along with increased growth of advanced science graduates coming out of Asian universities, will lead to the erosion of the competitive advantage of the United States’ while boosting the growth of emerging Asian knowledge economies. As Sputnik changed global politics, military expansion, and science development for decades after its launch, so too will the growth of Asian science education and research.

CURRENT BUSINESS CLIMATE

While many Asian countries like Singapore are expending their knowledge economies, the general focus of the international political environment is being placed on China. As of today, China is becoming an important base of operations for technology research and development. Large technology companies like Hewlett Packard, Intel, Google, and Cisco have created research centers in China. These companies are expanding in one of the world's fastest-growing economies, not just for low cost manufacturing and as a market for U.S. goods, but as a center for innovation with a considerable, educated talent pool2. The aforementioned educated talent pool is an important factor for the growth of research and development of high-end technology in China.

This growth is leading to a massive change in the way Multinational Corporations do business. Many of these new research centers, such as the one being created by HP will focus initially on developing technology for large corporations and government. The new HP research park is focusing its resource son finding ways to connect extensive computer networks. This lab could eventually branch out to focus on consumer technology and trump traditional American technology design labs. This is evidence of a shift in traditional operations. Little more than 10 years ago, American multinationals created the design of their products domestically and only had products manufactured in China to utilize low cost labor. Now, entire company supply chains are being shifted with activities for research, design, manufacturing, and even after purchase support all being conducted in China.

The shift in knowledge and operations is growing. With such a large shift in